In traditional IT environments, services to customers are delivered and supported by the organization. A Service Level Agreement (SLA) is created with details like what would be the availability of service be, how reliable the service would be, what penalties can be charged in case of downtime, etc. The internal teams like the network administration team, development team, IT service desk, etc. would then draw up Operational Level Agreements (OLAs) to support the SLA.
This used to be an easy process to manage.
But as IT environments have gotten complex, services now require the involvement of several internal and external teams to meet customer expectations. So now there is not only an SLA that you negotiated with your customer, and its supporting internal OLAs, but also SLAs that you as a customer have agreed upon with your own suppliers. These SLAs are technically also OLAs that support the SLA drawn up with your own customer.
We don’t blame you! It is enough to turn the process of negotiating SLAs with your customers very complicated. Therefore, understanding the difference between the two types of agreements is of extreme importance. But first, let us look at what each type of agreement means, and then dive deep into what makes them different.
What are SLAs?
A Service Level Agreement (SLA) is an agreement or a contract between a service provider and its customer about providing services that meet the customer’s expectations.
SLAs are all about addressing business level requirements and managing business expectations e.g., how long can the business expect a service to be down if there is an outage.
SLAs establish the scope of the services requested by the customer from the provider, they define the metrics by which the services are measured and the penalties in case the negotiated service level is not met.
Technology companies’ SLAs may include network uptime commitment of 99.99%. If this is not achieved, the customer is entitled to cut down their payment by a certain percentage based on the scale of the outage. If you want to know more about how to set, measure and report SLAs, check our blog on 5 Practical tips to set, measure and report SLAs.
Importance of SLA
An SLA is for the end-user‘s peace of mind. They will have an SLA so that they can refer to it whenever they require to hold their vendor accountable. It also lists down the details about which type of service they will get. In case their needs are not met, they can mitigate some of the impacts by asking for monetary compensation from the service provider. For many organizations, this is the form of assurance they need to begin a strong relationship with a new partner with whom they have not worked before.
What are OLAs?
An Operational Level Agreement (OLA) is a commitment or an agreement that a service provider establishes for its internal customers to comply with SLAs. To provide seamless service delivery, both SLA and OLA need to be used cohesively. The assurance made in the SLA must be tangible and entirely backed by the OLA.
The OLAs are used to monitor internal service agreements like response time for incidents, problems assigned to IT groups, availability of servers that support multiple applications, etc.
OLAs clearly define what group within the IT department will provide what kind of support within the defined boundaries of the SLA. OLAs outline things like how the service desk should respond to incidents and requests, what protocols the service teams must undertake to get critical services up and running, what the DBAs should do to optimize the databases, what the desktop team should do to patch the desktop systems, etc.
What is the difference between SLAs and OLAs?
When defining such agreements, the most common mistake that the service providers make is negotiating an SLA with the customer before discussing and negotiating OLAs with internal support teams only to realize that the established SLA cannot be sustained and the whole process must be started afresh. So, understanding the difference between the two helps in identifying any cost differentials, constraints, and other dynamics before negotiating on an SLA.
The key differences between SLAs and OLAs are as follows:
1. SLAs are essentially agreements between a service provider and a customer. OLAs are contracts between the internal support departments of an organization that provisioned the SLAs.
2. SLAs are focused on the service aspect of the agreement such as the uptime and performance of services. OLAs, in contrast, are commitments made concerning the maintenance of the service.
3. The SLAs are applicable to the overall ticket resolution process while the OLAs are defined for individual support groups to which the tickets are assigned.
4. The Operational Level Agreements are more technical in nature than the Service Level Agreements.
5. The SLAs associate service providers with customers unlike the OLAs, so the SLAs have a larger target group than the OLAs.
Lets try to understand these two terms in a different context.
If you are looking to build a house, the agreement between you and the general contractor would be a Service Level Agreement about what needs to be done when. The contract that the general contractor draws up with all his workers and laborers would be an Operational Level Agreement.
The Service Level Agreements and Operational Level Agreements are important for service providers to manage service delivery and ensure customer satisfaction. So, organizations need to make sure that all the agreements in place are consistent and well supported by their internal teams.
SLAs and OLAs can contain similar types of information but understanding the difference between them will ensure seamless service delivery.